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House Passes 1099 Repeal

On
Thursday, the House of Representatives passed the Small Business
Paperwork Mandate Elimination Act of 2011 (HR 4) by a 314–112 vote.
The bill would repeal the expanded Form 1099 information reporting
requirements mandated by last year’s health care legislation. It
would also repeal the new 1099 reporting requirements imposed on
taxpayers who receive rental income.

Section
9006 of last year’s Patient Protection and Affordable Care Act (PL
111-148) expanded the 1099 reporting requirements to include all
payments from businesses aggregating $600 or more in a calendar year
to a single payee, including corporations (other than a payee that
is a tax-exempt corporation), and to include payments made for
property, starting with payments in 2012. The Small Business Jobs
Act (PL 111-240) enacted a requirement that individuals who receive
rental income must issue Forms 1099 to service providers for
payments of $600 or more made during 2011 and for payments made for
property and to corporations beginning in 2012. Both of these
provisions would be repealed by the bill.

The
House Ways and Means Committee report on an earlier version of the
bill says that the committee believes the burden imposed by the
expanded reporting requirement “is disproportionate as compared with
any resulting improvement in tax compliance and therefore [the
committee] believes that these requirements should be repealed in
their entirety” (Committee on Ways and Means, Report No.
112-15 to Accompany HR 4, p. 4 (Feb. 22, 2011)).

To
pay for repeal, HR 4 would increase the amount of the new IRC § 36B
health care credit that is subject to recapture. In a statement of
administration policy, the White House announced that, while it
supports repeal of the expanded 1099 requirements affecting
business, it “strongly opposes” the way HR 4 would pay for repeal.

HR 4
will now go to the Senate for consideration. That chamber has
already passed its own version of 1099 repeal as part of the FAA Air
Transportation Modernization and Safety Improvement Act (S 223).
However, the Senate’s version of repeal only addressed the health
care law’s 1099 requirement and not the rental property 1099
requirements. The Senate bill would pay for the repeal by rescinding
$44 billion of discretionary government spending.

The
House and the Senate will have to reach agreement on a revenue
offset before a bill can be sent to President Barack Obama. White
House opposition to the revenue offsets contained in both bills
makes the road to final passage unclear.Until the president agrees to sign this proposal, Benson
Goldstein, senior technical manager at the AICPA, cautions
practitioners that “clients with rental properties should continue
to keep the necessary records so that they will have the records
that would be needed to file 1099s in 2012.”

The
AICPA supports repeal of both 1099 provisions. In a Feb.
14 letter
to the chairman of the Senate Finance Committee, Max Baucus,
D-Mont., and its ranking member, Orrin Hatch, R-Utah, the chair of
the AICPA’s Tax Executive Committee, Patricia Thompson, urged the
repeal of the provisions and expressed the AICPA’s concerns about
the significant compliance burdens that businesses and rental
property owners will face if the expanded 1099 reporting provisions
are not repealed.